Employee Provident Fund (EPF) – Part 3

We have discussed about the impact on the profit rate charged by banks is normally lower for higher loan amount and vice versa. Before we further, let us see what are available withdrawal types for housing loan so that nothing is missed out in our discussion here.

•          Withdrawal to reduce or settle outstanding housing loan
•          Withdrawal for buying house
•          Withdrawal for monthly installment on housing loan
•          Withdrawal for flexible housing loan

Again as highlighted earlier, withdrawal to reduce or settle outstanding housing loan will be the best option based on criteria for less hassles and for better profit rate on our financing products. Withdrawal for buying house is very common for the first time purchaser because of the down-payment issue if can get something attractive deal from the developer or owner.

The next one is on monthly installment on housing loan where our monthly installment will be paid via our money from account two (2) in EPF based on total amount available when submitting our application. Let me illustrate from monetary value, say we have RM 12,000 in our account two (2) and our installment is RM 800, then EPF will pay on standing instruction by depositing into our saving/current account so that can be paid to our housing loan account. This is how it takes place on withdrawal for monthly installment.

Last but not least on withdrawal for flexible housing loan where this is almost similar to previous to pay on monthly basis and it has very tedious procedures and not all banks offering through this scheme. Since there is not much benefit from this withdrawal, no further discussion I want to highlight here.

In conclusion, I may say that the best option could be withdrawal to reduce or settle outstanding loan based on all the justifications we have seen earlier. You may judge accordingly and choose whichever the best suit with your need.

Employee Provident Fund (EPF) – Part 2

Let us focus on withdrawal of EPF savings to pay-off housing loan where I have highlighted earlier in previous article. How to choose among all four (4) types to be the best option? Let us discuss further on we can manipulate so that we can benefit. Not to forget, all these are legitimate and halal to be executed and it depends on how and what we choose on the withdrawal type.

Very common for new buyer to withdraw for the new and/or first house to avoid any down payment with own cash. However, have we ever noticed aware something not good by using or cash? Again this is based on case by case where if it’s required or mandatory to pay down-payment of 10% then no choice besides to pay the amount. If we’re buying with some rebate by the developer or by the owner, there might be some scenarios where we’re not really required to pay the down-payment besides some charges and fees for lawyers. So what would be the scenario where the purchaser normally still withdrawing the EPF account 2 amount to pay as down-payment? Let us discuss further about this scenario to have better clarity.

As discussed earlier, new purchasers for the first house don’t have any experience in purchasing a house, hence, end-up with some technical issues which will make the decision made is not beneficial for them. Our mentality to reduce as much as possible for housing loan must be removed from our mindset. Some may say that our house to be stayed must be loan-free property because it takes money from our pocket. YES! I agree with you but let us manipulate first so that we can manipulate for our benefit. There are some winning points I would like to share for our benefit mainly on documentation required, financing profit rate, and loan amount. There might be some area I missed out you may leave the comment for further discussion.

The most significant benefit is mainly on the financing profit rate where as everybody aware the concept for housing loan, “higher the loan amount, lower the profit rate” and this is very common in most of the banks. This is not something I’m sharing just by reading but based on personal experience where profit rate for loan below RM 100,000 is BFR – 1.6 and above RM 100,000 is BFR – 2.2 (this is before new mechanism on profit rate is introduced). Just to share in term of monthly instalment, my monthly instalment for housing loan of RM 108,000 is same as my housing loan of RM 91,000 which is approximately RM 500. Let us read and digest first before we go further discussing other types.

Employee Provident Fund (EPF) – Part 1

Everybody knows that EPF is a way savings during retirement by forcing us to park our contribution and employer’s contribution there and prohibited from withdrawing it until meet certain requirements. So what exactly to be discussed here? Typical question isn’t it? Give an applause to yourselves buddy! Why? Because you want to know more about this article.

I’m sure that most of us know about types of withdrawal from EPF account one (1) and account two (2). However, type of withdrawal is not same and it is based on purpose of withdrawal. Basically withdrawal of account one (1) is something reversible whereby withdrawal account two (2) is something irreversible. So? More exciting? Great!

Generally there are approximately eleven (11) types of withdrawal where we are entitled to withdraw and each type has its unique criteria. Out of 11 types, I’ll discuss mainly on five (5) only. If you are interested on all 11 types, kindly leave comments and I’ll email you separately for the types available. Here is more on our strategy to optimize for our financial goal. The withdrawals we’re going to discuss is mainly cover on housing loan and education loan. Withdrawal for housing loan itself has four (4) types can be elaborated further. So, how to prioritize between housing loan and education loan? Which one to be chosen first? My personal suggestion is that it would differ case by case. I would explain in detail for both scenarios for our benefits.

Why did I say it’s subjective for prioritizing between housing loan and education loan? As we all aware there’ll be some discount given for education loan (PTPTN) during some dedicated time and we must be aware about the promotion period. From my personal experience, there was promotion period with 20% discount if able to settle the whole amount of loan and it is very limited time only. Hence, it’s for recommended for me to settle it earlier because it is huge discount compared to any ROI of any investment portfolio can give us back the return.

Similarly, there are some strategies on housing loan as well which I will cover in upcoming article so that you’ll have some idea to digest first prior reading article on EPF – Part 2.